Money & Company

Tracking the market and economic trends
that shape your finances.

« Previous Post | Money & Company Home | Next Post »

Higher FHA loan limits reinstated for high-cost housing markets

November 18, 2011 |  3:10 pm

CondoSantaMonica

Uncle Sam has thrown California and other high-priced housing markets a lifeline.

President Obama on Friday signed into law a bill that will reinstate higher limits for Federal Housing Administration-backed mortgages in high-cost areas. In expensive housing areas such as Los Angeles and Orange counties, the limit for these FHA-backed loans had dropped to $625,500 from $729,750 on Oct. 1. The change became effective Friday.

Similar ceilings applying to loans that can be backed by Fannie Mae and Freddie Mac will not increase. The California Assn. of Realtors and its larger national partner association had lobbied for all of the loan limits to be reinstated.

The group is “pleased the Senate and House were able to come to a reasonable compromise,” LeFrancis Arnold, president of the group, said in a statement Friday. “However, we are disappointed that the Senate and House could not agree on increasing the loan limits for Fannie Mae- and Freddie Mac-insured loans.”

A bipartisan group of California lawmakers had sought the increase of all of the old limits, but the House Appropriations Committee had raised concern that Fannie and Freddie, which have received more than $150 billion in financial rescue money from taxpayers, have received public scrutiny for “questionable business practices,” The Times previously reported.

The FHA has also come under increased scrutiny as that agency said in a report to Congress this week that it could be headed for its own taxpayer bailout.

Rep. Brad Sherman (D-Sherman Oaks), in a statement said the passage of the higher FHA loan limits would help “prevent a collapse of housing prices in high-cost areas like Los Angeles.”

Indeed, sales of properties in Orange and Los Angeles counties with loans between $625,500 from $729,750 fell sharply, to 102 last month, according to San Diego real estate firm DataQuick. That was a 71% decline from 350 in September and down 71.5% from 358 sales in October 2010.

But the Obama Administration warned this week that it is important for the federal government to get out of the mortgage business.

“We believe that lowering the limits is a step to ensuring that private capital will return to the market,” Carol Galante, the acting FHA commissioner, said during a congressional confirmation hearing Thursday. “We understand at the present time FHA is playing a somewhat outsized role in the market.”

RELATED:

Banks' foreclosure activity picks up

Victims of improper foreclosure practices can submit claims

Many Americans say they will have to work until they're 80

-- Alejandro Lazo

twitter.com/alejandrolazo

Photo: Simon Salloom, a Coldwell Banker real estate agent, walks through a condominium in Santa Monica. Credit: Mel Melcon/Los Angeles Times

Comments 

Advertisement










Video